Controversy Over Economic Impacts Of California’s Climate Law: A Comparative Analysis Of Projections

FOR IMMEDIATE RELEASE

CONTROVERSY OVER ECONOMIC IMPACTS OF CALIFORNIA’S CLIMATE LAW: A COMPARATIVE ANALYSIS OF PROJECTIONS

CRS Provides First of its Kind Examination of Differing Economic Studies on Impact of AB 32 and Finds State Study is Consistent With Mainstream

CONTACT
Jeff Swenerton
CRS Communications Director
415-561-2119
jeff@resource-solutions.org

SAN FRANCISCO (December 3, 2009) — Amidst debate over the economic implications of California’s landmark global warming law, the Center for Resource Solutions (CRS) today released a report comparing the assumptions, models and results of differing economic analyses. Three of four prominent analyses show the costs of climate policy are far outweighed by projected economic growth, the new study finds.

Climate Policy and Economic Growth in California examines the assumptions, models and results of four different economic modeling efforts conducted by the following organizations: l) California Air Resources Board (CARB); 2) University of California researchers; 3) Charles River Associates/Electric Power Research Institute; and 4) Varshney and Tootelian.

The first three studies all found strong growth even while considering only a narrow class of benefits—expected energy savings from efficiency measures. The fourth study, Varshney and Tootelian, includes only costs and no benefits associated with the law. Broader economic benefits expected to occur, such as boosts to the clean energy and pollution control sectors, improvements in public health, and increased investment in clean tech industries, were not included in any of the studies.

“Our examination revealed that the state’s economic analysis is consistent with other major independent macroeconomic studies, including those from the University of California, the Electric Power Research Institute and Charles River Associates,” said report author Chris Busch. “Each show strong statewide economic growth under AB 32. The story these models tell is that climate solutions are affordable and economic growth is expected to be robust at the same time that pollution reductions of the magnitude called for by AB 32 are achieved.”

Highlights of the report include:

Three of four studies involve sophisticated Computable General Equilibrium type economic models. The Varshney and Tootelian study uses a less advanced input-output model that does not allow for shifts in production decisions based on energy prices.

Three of four studies use the standard approach that involves three steps: l) Forecasting a Business As Usual (BAU) scenario (assumes AB 32 does not exist) of California’s economy each year to 2020; 2) Developing a scenario of expected changes that result from AB 32 implementation; 3) Computing the difference between BAU and AB 32 scenarios

The fourth study, Varshney and Tootelian, does not develop a Business As Usual scenario and instead imposes CARB’s estimates of AB 32 costs only on 2008 data to evaluate economic impacts.

Three of four studies produce similar results showing sustained long-term economic growth with minimal impact from the implementation of AB 32. Varshney and Tootelian produce dramatically different results reflecting costs only.

“Even without computing a broad range of economic benefits associated with reducing emissions, three of four mainstream studies show similar results: robust economic growth in California after the implementation of AB 32,” remarked Busch. “Our comparative analysis shows clearly that the Varshney and Tootelian study is an outlier in assumptions, modeling and result.”

About Center for Resource Solutions
Center for Resource Solutions (CRS) is a national nonprofit with global impact. CRS brings forth expert responses to climate change issues with the speed and effectiveness necessary to provide real-time solutions. Its leadership through collaboration and environmental innovation builds policies and consumer-protection mechanisms in renewable energy, greenhouse gas reductions, and energy efficiency that foster healthy and sustained growth in national and international markets. For more information about its programs, including Green-e, visit www.resource-solutions.org and www.green-e.org.

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